U.S. Equity Market Cheat Sheet (November 14, 2011)
The domestic stock market as measured by the S&P 500 Index was higher this week by 0.85 percent. Nine sectors of the S&P 500 increased and one decreased. The best-performing sector for the week was health care which increased 2.33 percent. Other top-three sectors were consumer staples and energy. Financials was the worst performer, down 0.49 percent. Other bottom-three performers were materials and technology.
Within the health care sector the best-performing stock was Tenet Healthcare Corp., up 6.79 percent. Other top-five performers were Merck & Co., Express Scripts Inc., Wellpoint Inc., and Amgen Inc.
Strengths
- The health care facilities group was the best-performing group for the week, up 7 percent on strength in its single member, Tenet Healthcare Corp. In the prior week, the hospital operator reported earnings and revenue above the consensus estimates.
- The brewers group gained 6 percent, led by the group’s single member, Molson Coors Brewing Company. The brewer’s stock sold off the prior week on an earnings miss, but recouped part of the decline this week.
- The home improvement retail group outperformed, rising 5 percent with both members (Home Depot Inc. and Lowe’s Cos. Inc.) increasing. A major brokerage firm upgraded its rating on Home Depot to “Outperform” from “Sector Perform.” Both home improvement firms report earnings next week.
Weaknesses
- The coal & consumable fuel group was the worst performer, down 6 percent, with all three group members declining. A major brokerage firm’s industry report projects declining steam coal prices, driven by decreasing demand at the same time that supply is increasing.
- The home entertainment software group lost 5 percent on weakness in its single member, Electronic Arts Inc. Stock of the game maker appeared to sell off in sympathy with fellow game maker, Activision Blizzard Inc., which sold off after announcing that subscriptions to the multiplayer online game “World of Warcraft” dropped to 10.3 million in the third quarter, down from 11.1 million three months earlier.
- The casino & gaming group declined 4 percent, led down by its largest member, Wynn Resorts Ltd.
Opportunities
- There may be an opportunity for gain in merger & acquisition (M&A) transactions in 2011. Corporate liquidity is high, thereby providing the means to pursue acquisitions.
Threats
- A mid-cycle slowdown in the domestic economy would be negative for stocks.
- An escalation in concerns over sovereign debt obligations in Europe would be negative for stocks.
